Police Have No Duty to Protect You, Federal Court Affirms Yet Again

Police Have No Duty to Protect You, Federal Court Affirms Yet Again

12/20/2018Ryan McMaken

Following last February's shooting at Marjory Stoneman Douglas High School in Parkland, Florida, some students claimed local government officials were at fault for failing to provide protection to students. The students filed suit, naming six defendants, including the Broward school district and the Broward Sheriff’s Office , as well as school deputy Scot Peterson and campus monitor Andrew Medina.

On Monday, though, a federal judge ruled that the government agencies " had no constitutional duty to protect students who were not in custody."

This latest decision adds to a growing body of case law establishing that government agencies — including police agencies — have no duty to provide protection to citizens in general:

“Neither the Constitution, nor state law, impose a general duty upon police officers or other governmental officials to protect individual persons from harm — even when they know the harm will occur,” said Darren L. Hutchinson, a professor and associate dean at the University of Florida School of Law. “Police can watch someone attack you, refuse to intervene and not violate the Constitution.”

The Supreme Court has repeatedly held that the government has only a duty to protect persons who are “in custody,” he pointed out.

Moreover, even though the state of Florida has compulsory schooling laws, the students themselves are not "in custody":

“Courts have rejected the argument that students are in custody of school officials while they are on campus,” Mr. Hutchinson said. “Custody is narrowly confined to situations where a person loses his or her freedom to move freely and seek assistance on their own — such as prisons, jails, or mental institutions.”

Hutchinson is right.

The US Supreme Court has made it clear that law enforcement agencies are not required to provide protection to the citizens who are forced to pay the police for their "services."

In the cases DeShaney vs. Winnebago and Town of Castle Rock vs. Gonzales, the supreme court has ruled that police agencies are not obligated to provide protection of citizens. In other words, police are well within their rights to pick and choose when to intervene to protect the lives and property of others — even when a threat is apparent.

In both of these court cases, clear and repeated threats were made against the safety of children — but government agencies chose to take no action.

A consideration of these facts does not necessarily lead us to the conclusion that law enforcement agencies are somehow on the hook for every violent act committed by private citizens.

This reality does belie the often-made claim, however, that police agencies deserve the tax money and obedience of local citizens because the agencies "keep us safe."

Nevertheless, we are told there is an agreement here — a "social contract" — between government agencies and the taxpayers and citizens.

And, by the very nature of being a contract, we are meant to believe this is a two-way street. The taxpayers are required to submit to a government monopoly on force, and to pay these agencies taxes.

In return, these government agents will provide services. In the case of police agencies, these services are summed up by the phrase "to protect and serve" — a motto that has in recent decades been adopted by numerous police agencies.

But what happens when those police agencies don't protect and serve? That is, what happens when one party in this alleged social contract doesn't keep up its end of the bargain.

The answer is: very little.

The taxpayers will still have to pay their taxes and submit to police agencies as lawful authority. If the agencies or individual agents are forced to pay as a result of lawsuits, it's the taxpayers who will pay for that too.

Oh sure, the senior leadership positions may change, but the enormous agency budgets will remain, the government agents themselves will continue to collect generous salaries and pensions, and no government will surrender its monopoly on the use of force.

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The Fed Is Now Buying Corporate Bonds, Just As We Knew It Would

06/17/2020Robert Aro

The stock market rejoiced on Monday with stories such as this CNBC “breaking news” headline:

The Fed says it is going to start buying individual corporate bonds.

But here’s the interesting thing: this isn’t actually “news.”

The Fed’s announcement and the various mainstream media releases that followed didn’t offer much of anything we didn’t already know. In fact, we’ve noted the $750 billion bond buying program in several previous articles. We see that on the Fed’s weekly statistical release on May 14 it was noted that the financial statements were modified to include the Primary Market Corporate Credit Facility (PMCCF) and Secondary Market Corporate Credit Facility (SMCCF):

These facilities operate through the Corporate Credit Facility LLC (CCF LLC), a special purpose vehicle that was formed to support credit to employers through bond and loan issuances and to provide liquidity to the market for outstanding corporate bonds.

As noted above, the CCF LLC is where the purchases of corporate bonds and bond exchange-traded funds (ETFs) will be held on the Fed’s balance sheet. The program started with the first purchase last month and has been growing since. The balance now stands at $37 billon per last week’s release.

The difference between the two programs is not slight, as the PMCCF funds indicate that money is being created and lent directly to corporations while with the SMCCF money will be created to buy bonds from existing investors. When announcements of new money programs are made, markets seem to rally. But what of the negative effects which come with this credit expansion? Should the risk of bond default, trading losses, interest rate risk, propping up “zombie companies,” and countless other effects not be addressed by the Fed? What the Fed thinks about this remains unclear, as the usual “crisis,” “credit,” and “liquidity” buzzwords appear to be more important than anything negative that comes from these lending schemes.

Chair Powell presented the "Semiannual Monetary Policy Report to the Congress," where he shared his thoughts about the virus, job loss, the downturn, and the importance of the flow of credit, noting:

If not contained and reversed, the downturn could further widen gaps in economic well-being that the long expansion had made some progress in closing.

Ironic, since the Fed’s actions have done more for inequality than the virus ever could. Like the virus, the Fed’s actions should be “contained and reversed.” If not, we will watch as more Fed programs spread across the countryside, destroying both wealth and our future in the process under the guise of trying to alleviate a crisis which can hardly be articulated. Whatever is required to stop the Fed will not come from mainstream economists nor the media. But something must be done! Until that time, the “economic well-being” gap will continue to widen.

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MMT Confusion on Saving and Investment

A main thesis of modern monetary theory (MMT) is that fiscal deficits are not a problem. On the contrary, they create financial assets for the private sector (in a closed economy, a public sector deficit equals a private sector surplus). Moreover, if the government can always create money to cover its expenses, there is no need to fuss about government deficits. The pursuit of a balanced budget is, according to MMT supporters, completely misguided.

Ultimately, from an accounting point of view, public debt is a financial asset of the nonpublic sector, while, as L. Randall Wray’s writes in Modern Monetary Theory: A Primer on Macroeconomics for Sovereign Monetary Systems, “government deficits equal non-government’s surpluses, generating income that can be saved.”

This claim is very Machiavellian. From an accounting point of view, everything is correct, strictly speaking. The deficit in one place must equal the surplus in another. Conversely, governments can get into debt only if citizens put aside some savings that they agree to pass on to the government. At first glance this may sound fairly reasonable.

This sort of accounting, however, obscures the economic nature of events and tells us nothing about causality. We can change the definitions of our accounting terms all we want, but that still won’t mean that government deficits can produce prosperity.

We also encounter MMT confusion when it comes to the interpretation of budget surpluses. According to Wray, the Clinton administration’s budget surpluses were “just the flipside to the private sector’s deficit spending.” That is, they were simply a side effect of private sector deficit-financed expenditure. However, it is unclear how the private sector could be indebted to the government, which shows that this whole approach is highly suspicious.

Indeed, the supporters of MMT once again redefine the basic terms. As Robert Murphy notes, “when MMTers speak of ‘net saving,’ they don't mean that people collectively save more than people collectively borrow. No, they mean people collectively save more than people collectively invest.”

Murphy continues:

the MMTers are certainly correct when they observe that “private saving net of private investment” can't grow without a government budget deficit (again if we disregard foreign trade). But so what? The whole benefit of private saving is that it allows for more private investment.

By redefining “net saving” in this way, MMTers are ignoring the primary source of wealth creation, i.e., investments (and an increase in the market value of assets). Of course, any definition can be used, but the supporters of the MMT have chosen one that suggests that the government must have a deficit for the private sector to increase its net savings. The fact that any debtor’s obligation means a creditor’s claim is irrelevant to the basic fact that the private sector can increase its savings and assets even in a situation without a government deficit.

The above analysis clearly shows that MMT is largely based on semantic manipulations and using definitions different from generally accepted ones. However, when you get through this conceptual chaos, you see clearly what the MMT is all about. The whole theory seems to exist only to justify higher government spending and larger budget deficits (it is no coincidence that Congresswoman Alexandria Ocasio-Cortez or Senator Bernie Sanders refer to the MMT when asked about the source of funding for the Green New Deal or universal healthcare and free higher education).

Let’s give the floor to Wray himself (p. 8):

Imagine how the policy discourse will be changed when our President could no longer claim that “Uncle Sam has run out of money”; when our government can no longer refuse to create jobs, or to build better infrastructure, or to put astronauts on Mars because of lack of funds.

For the supporters of MMT, the government is almost a divine institution that creates money with its expenses and does not have to worry about this dismal economics and the limitations of its laws. Government deficits are not bad and do not lead to a crowding-out effect and interest rate increases. On the contrary, in the MMT view, deficits lead to decreases in interest rates, because they increase the amount of bank reserves; they also allow the private sector to accumulate wealth. As long as it issues its own currency, the government has virtually no financial restrictions. Limitations exist only in the minds of politicians and orthodox economists—we can afford much more; we can finally have full employment!

It is not surprising, therefore, that the MMT has recently gained despite its theoretical problems. The controversial program that turns the whole of economics on its head, promising full employment, must attract public attention, especially in times of economic crisis. Let’s hope, however, that this popularity will not prove permanent and MMT will be abandoned.

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Drudge Report, RIP

06/16/2020Ryan McMaken

Like many people, there was once a time when I visited the Drudge Report multiple times per day. Drudge often had a fun mix of contrarian articles and unusual viewpoints that were hard to find without its help as a curator of articles.

But in recent years, the site has become more or less indistinguishable from a standard mainline legacy media site. It has consistently carried articles and headlines that promote Russiagate hysteria and pro-FBI, pro-CIA positions.

To a certain extent, this wasn't shocking, since the site has always been bad on foreign policy and had a neoconservative slant in that respect.

But now the Drudge Report consistently leans in favor of COVID lockdowns and promotes panic, authoritarianism, and generally pushes crisis porn on a daily basis. It is now, for all practical purposes, a sister site to CNN.com or The Atlantic.

The only aspect of the site that remains unchanged is its devotion to carrying lurid stories on the topics of pornography, brothels, and Hollywood gossip. Rarely does a week go by, for example, when the Drudge Report doesn't carry at least one new headline on sex with robots, or perhaps robot brothels. These headlines historically were good for a laugh. But now these headlines, never actually worth a click, are just side by side with standard mainstream media headlines that parrot the views of the CDC, the WHO, or some other group of government "experts."  In other words, the joke headlines aren't valuable enough in themselves to warrant a visit to the site anymore.

Why did this happen?

Some claim that Matt Drudge sold the site to others and new editors have taken over. I have no idea if this is the case. It's entirely possible that Drudge is still the editor but is phoning it in. After all, the problem may simply be that he's just getting old and lacking in ideas. He may have just lost his touch.

Either way, it's now safe to ignore the the Drudge Report as a source of any "alternative," rare, or unusual viewpoints. You'd get pretty much the same content going straight to the Washington Post.

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You Can't Defund the Police without Defunding the Government

06/16/2020Todd Seavey

The slogan Defund the Police sounds milder than the previously popular F— the Police. Though viewed as radical at the moment, the newer slogan might turn out to be only an intermediate step on a path to some tepid reform plan such as “Modest Budget Cuts for the Police in the Next Fiscal Year.”

You misunderstand if you think I’m unwilling to think more radically than that. But even if you’re a fellow libertarian, the odds are that you’re easily confused by radical resistance strategies, confused about which ones are most compatible with liberty.

For instance, those libertarians who’ve lately jumped on the fashionably left-liberal bandwagon on various “intersectional” and “ethnic sensitivity” issues are usually, in my experience, the same ones who would’ve fainted a decade or so earlier if you had told them, logically enough, that you thought President Lincoln did some terrible, warlike things but that you also thought John Brown’s rebellion, in which slaves rose up and slaughtered slave owners, was completely justified.

This simple extrapolation from the principle of self-defense is one that I’ve found that the unfashionable, un-PC “right-wing” libertarians, including the ones at the Mises Institute, have usually been happy to make, as they should be. (Mises Institute cofounder Murray Rothbard even had a soft spot for some Latin American leftist revolutionary groups, because they were fighting coercive, essentially aristocratic landowners.)

So, let’s hear no nonsense about how those libertarians who condemn recent riots and looting in harsh terms must be racist or apathetic about police brutality. You can denounce moblike brigandage as an imminent threat to civilization and simultaneously denounce the routine abuses by, as they say, “the gang in blue.”

Minorities will likely be hit hardest by the looting’s economic aftermath, since it’s their neighborhoods burning. When that becomes apparent, recall all the evil, sociopathic leftists you know who kept saying, “It’s only property. Property can be replaced.” What arrogant, vicious, entitled little quasi-Marxist zombies they are. But I condemned them in an earlier column.

The corollary point is that there may be times when there’s more reason to fear the looters and other criminals than the police, but saying so doesn’t mean ruling out radical, more long-term changes in policing. All government is violence, telling people to do things they don’t want to do and preventing them from doing things that they do want to do. That violence should end, and police—except in those narrowly defined instances when they prevent greater violence, as from rapists and burglars—are the point of the evil spear that is the state.

If people really want to “defund the police,” I’m all for it—but you’d better do this the right way.

That means recognizing that people, all people, will still have a right to defend themselves against violence and theft. In a postpolice world, there should be no pretense that one’s right to carry a gun can be restricted. There should be no limit on the right to form private, voluntary police services, from militias to arbitration firms, so long as they in turn respect others’ rights. People will still need to settle disputes, after all, and I’d hope that your desire if you say “defund the police” isn’t to just leave innocents at the mercy of violent people, who inevitably will still exist.

Some people chanting that mantra—even one on the Minneapolis City Council, in the case of Lisa Bender under questioning by CNN—seem to have thought no farther than the defunding. Asked what happens if someone’s home is attacked in the night after the police are defunded, her main reply was that that question comes from a place of “privilege.” Well, be that as it may, the practical problem is not going to go away.

Nor do the mountains of articles and books from anticop and antiprison leftists purporting to answer the question really seem to get the job done, despite the exasperation and anger you can evoke from the readers of such materials by suggesting that they don’t have good answers. They’ll use the word “community.” And they usually seem to imply that people are going to keep paying their taxes even if they can no longer be put in jail for failure to do so, since there seem to be many tax-funded programs that the activists like more than they like police departments. Good luck with that.

But the truth is that all government programs and all laws cease to be enforceable if police truly go away—and that’s fine with me (aside from wanting laws against assault, theft, and fraud). Just recognize that the practical answers about how to provide services, including eternally necessary police services, after the Great Defunding will have to come from libertarian thinking (specifically anarcho-capitalist thinking) and not from the big government–assuming, tax-sucking left.

No, not even from left anarchists, who look down their noses at anarcho-capitalists but are quickly reduced to incoherence if asked for details about how they’ll spontaneously yet collectively deal with dissenters and violence—except by making rules that recognize people’s right to defend their bodies and property, which sound like anarcho-capitalist laws to me.

Say goodbye, then, to the looters, the government cops, the welfare state, the violent street gangs, the tax-funded military, and the whole coercive system. But don’t say hello to some ludicrous socialist fantasy in which government is somehow still there to cater to you. Say hello to efficient private security guards and all the other wonders the market has to offer when it’s being neither regulated nor burned down.

This article originally appeared at Splice Today.

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Why Are Governments So Enthusiastic about Destroying All Institutions except the State?

06/16/2020Lisa Mccusker

Since the COVID-19 shutdown began, the media has framed it as a shutdown of the economy, making resistance to it appear to be about putting profit over life. This is not an accurate description of the shutdown. The shutdown policy is currently disrupting or transforming all of our major social institutions: government, education, health, economics, religion, and family. These institutions form the basis of our society, as they provide for our individual and collective needs. Yet each is undergoing massive changes:

  1. Government: the disruption of elections from the national to the local level.

  2. Education: the disruption of the socialization and education of all of our children and of the preparation of our young adults for professional life.

  3. Health: the disruption of ordinary health services from vision, dentistry, and non-COVID needs (cancer, heart disease, diabetes) to the public health oversight of domestic violence and child abuse.

  4. Economics: the disruption of the basic processes of working and earning a living.

  5. Religion: the disruption of the religious congregations that provide meaning, community, and social support to millions.

  6. Family: the disruption of parents' ability to support their families, and to rely on public schools to educate and care for their children while they do so.

There is not a single social institution that has been left intact by those who are now determining our public policies. At what point do these disruptions, along with the incessant calls for a "new normal," become a subversion of the institutions we have built and upon which we rely? All this is happening without public discussion, much less consensus.

It is time to stop focusing on the official distraction of minutiae: masks, handwashing, and six feet apart, and start seeing how the disruption of all major social institutions is impacting the lives of everyone in America. We came together as a nation to "flatten the curve," but by now it is clear that, much like with the Iraq War, there is no exit strategy.

Growing Up Insane in America

Science has taught us a great deal, but where are the national voices of psychologists describing the effects of long-term stress as they see depression rise and an epidemic of suicides; of social workers commenting on increases in domestic and child abuse now going unreported and uninvestigated; of cardiologists informing about the dangers of sedentary isolation and unhealthy weight gain with the advocacy of binging on Netflix? Where are the pediatricians studying the brain-altering effects of excessive screen time for young children, or the gerontologists explaining the immunological effects of isolation on the otherwise healthy elderly? Why is epidemiology the only science weighing in on the health of our nation?

As an educator, I ask how we can utterly dismiss the education of our youth so easily. "Distance learning" is an oxymoron for all except the most mature of young adults. We know that children who fall behind in skills by third grade have higher chances of dropping out of school and ending up in the prison pipeline. The United States already suffers from vast levels of inequality. Education is understood to be the only way out of poverty. I question whether epidemiologists should be allowed to dismiss the entire base of knowledge and laws put in place to safeguard the education of the next generation.

Why is the current disintegration of all social institutions being substituted for the judicious isolation and care of the sick? Who benefits from such large-scale disruption of our entire society? The recent protests and riots have called to mind the critical year of 1968 in America and across the world. How many of us recall the 1968 pandemic that killed one hundred thousand Americans and 1 million people worldwide? I can hear readers saying “But we’ve already had a hundred thousand Americans die! This is worse!” I ask them to bear in mind that the US population in 1968 was a little over 200 million, as opposed to the current 330 million. When we reach 166,000 deaths we will have about the same per capita death rate in the US as during the pandemic of 1968. Is our handling of this pandemic better? Will we be stronger when we emerge?

We have now seen massive gatherings of people across the United States and the world, breaking rules of distancing, isolation, and masks. If we do not see equally massive increases in our hospitals within two weeks, will it affect the official narrative of our epidemiologists? Or will we be asked to continue sacrificing society as we know it?

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A Rejoinder to Jeff Deist on CHAZ

06/15/2020Walter Block

The Capitol Hill Autonomous Zone (CHAZ) is an area of several city blocks in Seattle that has been taken over by a group of people unconnected with the government. They have established a police-free zone and are now busily administering this territory.

Is this a voluntary socialist commune? A free enterprise zone? Are the new inhabitants who have seized control of the area legitimate homesteaders or illegal squatters, that is, trespassers? Who are now the proper owners of this acreage, of the buildings, roads, parks, and houses therein?

From a libertarian perspective, we must first distinguish between (previously) city government–owned property and that of the private storekeepers, homeowners, and other private citizens. As to the latter, the analysis is easy: they should remain in control of their property, and if the CHAZ folk interfere with their continued use of these possessions of theirs, they are in the wrong. But what about public property? CHAZ now possesses the streets, police stations, libraries, museums, post offices, parks, opera houses, and other assets previously in government hands. Who, now, has a right to take charge of all of these goods?

Suppose we were privatizing this area under Rothbardian rules. Who would obtain which government assets? “Homesteading” and “Rothbard” are not synonyms in the English language, but in the present context they might as well be. All of these resources would belong to the owners of private property in the area. However, there is one difficulty in concluding that control of this material properly belongs to them and not to the CHAZites: these locals did nothing to claim ownership. They did not lift a finger in objection to governmental property in their area. One part of homesteading, to be sure, is to “mix one’s labor” with virgin territory. But, another is to declare ownership. Rather, the CHAZers did precisely that. They actually seized control of illicit statist property. At the very least then, even if the previous owners were to be given a portion of these statist goods, the CHAZ people would certainly be owed what might be considered a “finder’s fee.”

Of course, implicit in the Rothbardian notion of homesteading is that it is open to just about anyone, except for criminals. The actual possessors of CHAZ, as of this writing, are members of Antifa, a criminal organization, guilty of vast mayhem, looting of private property, assault, threats, etc. So they cannot be the proper owners of the goods in question. But suppose that instead of Antifa a group of Rothbardians took on this role (we pass quickly over the point that the powers that be in Seattle and Washington State, although looking on somewhat askance but also benignly at CHAZ, would crush without mercy any free enterprisers who acted as they have, in a similar manner to what happened to David Koresh in Waco).

Would the ownership of the libertarian CHAZers be legitimate, not of the private hotels, restaurants, shops, houses, and condos in this six-block area, but, rather, of the public facilities? It is difficult to see why not. After all, according to strict
Rothbardianism, these amenities are not—cannot be—legitimately owned by a coercive government. If this is so, then they are unowned and therefore available for the taking by the next homesteader to come down the pike. And that would be this passel of hypothetical Rothbardians, not the owners of the private facilities who long acquiesced in paying compulsory taxes to support them.

Another theory, prevalent in libertarian circles on this matter, has been put forth by Hans-Hermann Hoppe and by Jeff Deist in this recent article. In this Hoppean view, the proper owners of the government roads, streets, parks, libraries, museums, etc., are not the libertarian homesteaders. They are but trespassers. No, the appropriate titleholders are the long-suffering taxpayers. And which organization is their agent? Why, the very government that has long been abusing them in this manner.

The Hoppean solution to the problem is open to several objections. First, Hoppe is a world-class anarcho-capitalist. There is at least a certain tension, not to say a blatant self-contradiction, in such a scholar holding out the state apparatus as the agent of the tax victims. No, the government is not their agent; it is their abuser. Hoppe here is in the unenviable position of taking on the role of a progovernment anarchist. So much for deontology.

Second, this thesis also faces a pragmatic difficulty. Remember, the would-be homesteaders here are all Rothbardians. They will attempt to engage contractually with the home and business owners along the hypothetical lines of what would have occurred had free enterprise been the order of the day right before the time of settlement. For example, the road owners will not charge the locals gigantic fees for usage of their holdings to the locals. Rather, they will require an amount that would have arisen had they attracted businesses to locate along their thoroughfares before anyone had located there. This hypothetical fee level would have been voluntarily agreed upon. And, ditto for use of the parks and other features of the urban landscape.

But Hoppe’s theory would say nay to these arrangements. This author would place in charge, as their “agent,” the very institution responsible for the deviation from pure Rothbardianism in the first place. Thus, the implication of Hoppe’s theory would be a very conservative one, conservative in the worst sense. What would be conserved, in this view? It would be the reinstitution of government control over these premises. The anarcho-libertarian homesteaders would be considered illegal squatters and arrested for their supposed violation of private property rights—the roads, parks, etc., presumably owned by the taxpayers. To see the falsity of this, let one of these citizens try to sleep in a government park or library overnight; he will soon become acquainted with their real owner. It is not him. Not even close. Under Hoppeanism, there would be no way for the ancap libertarians to “seize the streets.” The roadways would be forever in the hands of the evil state.

That is not the libertarianism of the Rothbard variety. (I full well acknowledge that Rothbard himself would not allow the “bum” in the public library. He would side with Hoppe in this matter. I speak here, then, of the platonic version of Rothbardianism that would exult in such a ruination of public property.) Either we take the libertarian rejection of public property seriously, or we do not. If the latter, we reduce the power and accuracy of this philosophy. My motto in matters of this sort is the following: “If it moves, privatize it; if it does not move, privatize it. Since everything either moves or does not move, privatize everything. A CHAZ undertaken by Rothbardians is a move in the right direction.

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Interest Rates and the Demand for Money

06/15/2020Frank Shostak

According to mainstream thinking, the central bank is the key factor in interest rates. By setting short-term interest rates, it is argued that the central bank can influence the entire interest rate structure by creating expectations about the future course of its interest rate policy.

In this way of thinking interest rates are set by the central bank and the individuals plays almost no role except for mechnically forming expectations about the central bank's future policy. Individuals passively respond to the possible policy of the central bank.

But does it make much sense that central banks are the key factor in interest rate determination? What about past periods when we did not have central banks? How were interest rates determined then?

To establish whether the central bank plays any role in interest rate determination, we must define interest.

What Determines Interest Rates

Following the writings of Carl Menger and Ludwig von Mises the driving force behind interest rates is individuals' time preferences, not the central bank.

As a rule, people assign a higher valuation to present goods versus future goods. This means that present goods are valued at a premium to future goods.

Lenders and investors give up some benefits in the present. Hence, the essence of interest is the cost that a lender or an investor endures. On this Mises wrote in Human Action,

That which is abandoned is called the price paid for the attainment of the end sought. The value of the price paid is called cost. Costs are equal to the value attached to the satisfaction which one must forego in order to attain the end aimed at.

According to Carl Menger in Principles of Economics:

To the extent that the maintenance of our lives depends on the satisfaction of our needs, guaranteeing the satisfaction of earlier needs must necessarily precede attention to later ones. And even where not our lives but merely our continuing well-being (above all our health) is dependent on command of a quantity of goods, the attainment of well-being in a nearer period is, as a rule, a prerequisite of well-being in a later period….All experience teaches that a present enjoyment or one in the near future usually appears more important to men than one of equal intensity at a more remote time in the future.

Likewise, according to Mises,

Satisfaction of a want in the nearer future is, other things being equal, preferred to that in the farther distant future. Present goods are more valuable than future goods.

For instance, an individual who has just enough resources to keep himself alive is unlikely to lend or invest his paltry means. The cost of lending, or investing, to him is likely to be very high—it might even cost him his life to lend part of his means. Under these conditions he is unlikely to lend or invest, even if offered a very high interest rate in compensation.

Once his wealth starts to expand the cost of lending, or investing, starts to diminish. Allocating some of his wealth toward lending or investments is going to undermine his well-being in the present to a lesser extent.

From this we can infer, all other things being equal, that anything that leads to an expansion in the real wealth of individuals gives rise to a decline in the interest rate, i.e., to a lowering of the premium of present goods versus future goods.

Note how the essence of interest is not determined by a central bank nor by government activities. It is purely a reflection of individuals' preferences for consuming goods at present over consuming the same goods in the future.

This runs contrary to the popular expectations theory (ET), which states that the key to interest rate determination is the central bank's expected monetary policy.

Again, the heart of interest rate determination is individual time preferences. These preferences determine the underlying interest rate.

What the central bank does in all this is distort interest rates by means of its monetary policies. By falsfying market signals, it sets in motion the misallocation of resources.

The ET framework is an attempt to popularize the erroneous thinking that the central bank is at the heart of interest rate determination while ignoring the role of individuals.

Time Preference and Supply and Demand for Money

In the money economy individuals' time preferences are realized through the supply and the demand for money.

The lowering of time preferences, i.e., the lowering of the premium for present goods versus future goods, will be manifested in a greater eagerness to lend and invest money, and thus a reduction in the demand for money relative to the past. It will appear as an increase in the individuals' monetary surplus.

To reduce their increased monetary surplus, individuals will likely increase their purchases of various assets, raising asset prices and lowering their yields in the process, all other things being equal. Hence, the increase in the pool of real wealth will be associated with a lowering of the interest rate.

The converse is likely to take place with a fall in real wealth. People are likely to be less eager to lend and invest, raising their demand for money relative to the previous situation—lowering the monetary surplus that they would want to have. Consequently, all other things being equal, the demand for assets will fall, lowering asset prices and raising asset yields.

Change in Money Supply and Interest Rates

What will happen to interest rates as a result of an increase in money supply? Initially, an increase in the supply of money, all other things being equal, means that those individuals whose money stock has increased are now much wealthier. These people are now more willing to invest and lend money. Their increased willingness to lend and to invest means that lenders and investors' demand for money has fallen.

This coupling of an increase in the supply of money with a fall in the demand for money results in individuals holding more money than they really want, all other things being equal. As a result, individuals will try to dispose of the increase in the monetary surplus by buying assets. In the process they bid the prices of assets higher and lower their yields. (Note that there is a time lag between changes in the monetary surplus and changes in prices and economic activity.)

As time goes by, however, the increase in money supply gives rise to price inflation, which undermines the individuals' well-being and leads to a general increase in time preferences. This change in time preferences means that individuals' willingness to invest and lend is lowered (i.e., the demand for money is raised and works to lower the monetary surplus). This puts upward pressure on interest rates. Individuals will now reduce their purchasing of assets, thereby exerting downward pressure on asset prices and lifting their yields.

We can thus conclude that a general increase in price inflation, due to an increase in money supply and its consequent negative effect on real wealth formation, sets in motion a general rise in interest rates. A general fall in price inflation, in response to a fall in money supply and a consequent salubrious effect on real wealth formation, sets in motion a general decline in interest rates.

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What Does the American Flag Represent?

06/13/2020Gary Galles

June 14 marks Flag Day, commemorating the Second Continental Congress's authorization for a new American flag. But it is an unusual holiday.

Flag Day is little celebrated, sort of a poor relation to Memorial Day and Independence Day, which bracket it. And since what is being celebrated is a symbol, and symbols are slippery, it involves substantial amounts of ambiguity. To some, a flag might represent the ideals of a country at its founding. To others it might represent support for the current government of the country. To still others, it might represent the failings of a country to live up to its ideals and promise. And when you add the connections between the flag, the Pledge of Allegiance, the national anthem, and a contentious history of flag burning, it can lead to disagreement and divisiveness over a host of issues, rather than unity. Those issues have included charges that the flag represents nationalism, colonialism, imperialism, American exceptionalism, racism, xenophobia, not to mention what questions of what symbolic meaning should be attached to refusing to stand for the national anthem.

Given all the ambiguity and potential for confrontation between people whose veins are throbbing on their foreheads that our flag can cause today, it makes sense to clarify what the flag represents to us, to minimize such confusion-fueled confrontations. So, because of my commitment to liberty, I choose to see the flag as a symbol of American ideals.

From that perspective, one of the most inspiring views of our flag was given in an 1861 address by Henry Ward Beecher, “the most respected and idealized religious figure of the day,” who was considered by some as “America’s leading moral and spiritual teacher.” At a time when many have lost touch with the ideals of America’s experiment in freedom, it merits revisiting:

Our flag…means just what Concord and Lexington meant, what Bunker Hill meant…the rising up of a valiant young people against an old tyranny to establish the most momentous doctrine that the world has ever known—the right of men to their own selves and to their liberties. It means all that the Declaration of Independence meant. It means all that the Constitution of our people, organizing for justice, for liberty, and for happiness, meant.

A thoughtful mind, when it sees a nation’s flag, sees not the flag only, but…the principles, the truths, the history that belongs to the nation that sets it forth….the American flag is the symbol of liberty, and men rejoiced in it. Not another flag has had such an errand, carrying everywhere, the world around, such hope for freedom—such glorious tidings.

Our flag carries American ideas, American history, and American feelings….it has gathered and stored chiefly this supreme idea: Divine Right of Liberty in man. Every color means liberty; every form of star and beam or stripe of light means liberty; not lawlessness, not license, but organized institutional liberty—liberty through law, and law for liberty.

This American Flag was the safeguard of libertyIt was an ordinance of liberty by the people, for the people. That it meant, that it means, and, by the blessing of God, that it shall mean to the end of time!

Henry Ward Beecher’s vision of America, symbolized in our flag, echoed our founders’ ideal “that every man shall have liberty to be what God made him, without hindrance.”

I think it is unfortunate that many do not see that in America’s flag today. And those who have mixed or even hostile feelings toward our flag and the country it represents, because America has fallen short of its ideals, are misplacing their idealism and efforts. If they recognized, with Beecher, that “The history of this banner is one of Liberty,” and put their energy into reclaiming our founding vision of providing the broadest possible canvas for human freedom, they could reshape the world for the better instead of endlessly creating and repeating grievances. The harms we have suffered because America has too often abandoned its founding principle of liberty do not mean we should reject liberty; the decline in our liberty reveals just how essential it is.

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A Study in Decentralization: Colorado's Two Sets of Marriage Laws

06/12/2020Ryan McMaken

My social media feed tells me today is "Loving Day," which is the anniversary of the day the US Supreme Court invalidated state laws against against interracial marriage. Specifically, the name "Loving Day" refers to the case of Loving v. Virginia (1967), in which the Warren Court struck down the criminal convictions of Richard and Mildred Loving, two people found guilty of breaking the state's prohibition on interracial marriage. This was, at the time, a criminal act under state law. Many states during the twentieth century began to repeal a variety of restrictions on marriage long before the Loving decision, but sixteen states retained these restrictions, which the decision rendered unenforcable.

Marriage Laws Had Been Decentralized

The court's move to invalidate state laws on the matter was part of a growing trend to federalize what had been state and local matters. This included, for example, both abortion and immigration.

Among the states with restrictions on interracial marriage was Colorado, at least until these laws were repealed in 1957. Colorado appears to have been a special case, however, in that marriage laws were not uniform within the state during the days of the interracial marriage prohibition. Although it appears that all other states had uniform laws in this respect, Colorado had two different sets of laws coexisting side by side. 

Colorado's Two Sets of Marriage Laws: An Odd Case Study

Specifically, the northern part of the state restricted interracial marriage, while there was no such probitition further south. 

Specifically, the statute read:

Also all marriages between Negroes and mulattoes, of either sex, and white persons, are declared to be absolutely void.

Penalties for breaking this statute included fines ranging from $50 to $500 "or imprisonment of not less than three months nor more than two years."1

But Colorado alone had an odd addition to this. It reads:

The provisions of this statute are not to be so construed as to prevent the people living in that portion of the State acquired from Mexico from marrying according to the custom of that country.2

This exception stems from the fact that the US border once stopped at the Arkansas River in southern Colorado. After the Mexican War (1846–48) the US annexed much of the northern half of Mexico, including the portions of modern-day Colorado south of the river. These portions were acquired with the promise that the US would not violate the established legal customs of the indigenous Mexican population. This was a feature of the Treaty of Guadalupe Hidalgo.

Thus, when Colorado adopted its anti-mixed-marriage statutes in the late nineteenth century, it had been less than twenty years since the signing of the treaty. It is likely that state representatives and senators from the southern part of the state insisted on an exemption for the part of the state that had formerly been Mexico, and where laws governing race relations were quite different.

(The formerly Mexican portion of the state was not without political influence, as we can extrapolate from the fact that a third of the framers of the Colorado Constitution were Spanish speakers and from the fact that the original state constitution stipulated that all new laws be promulgated in Spanish as well as English.)

Interracial Marriage Was Viewed Differently in Southern Colorado

The social structure of New Mexico (and Mexico overall) was more fluid in terms of race than was the case in the Anglo-dominated portions of the United States. According to historian Richard White in his history of the American West, residents of New Mexico (the northern portion of which would eventually be absorbed by Colorado) did indeed group themselves into whites, mestizos, and Indians. Whites were at the top of the social ladder and Indians at the bottom.

But there was a catch. White writes:

The elites of New Mexico and California, who were more often mestizo than Spanish, created a myth of pure Spanish descent to validate their state and ensure their rule over people who, in fact, shared a similar descent. They imposed fictitious racial categories to buttress a social order already in place.

In a sense, racial categories were invented after the fact to solidify a certain social order. But by then it was difficult to distinguish different social classes based on physical appearance or perceived race. Because the Catholic Church was generally laissez-faire on marriage between two baptized persons of any race, intermarriage (mostly with members of Indian tribes) had significantly blurred racial lines in New Mexico and other areas that were formerly part of Mexico.

Thus, had legislators in Denver attempted to impose race-based regulations on southern Colorado, this would have been nonsensical from the perspective of a Mexican-American who viewed race quite differently from an Americans of more Anglo-dominated regions. For the Mexican-Americans of New Mexico and southern Colorado, "race" was code denoting socio-economic class.  Things were quite different further north in the state. Moreover, such a mandate against intermarriage could easily have been construed as a violation of the Treaty of Guadalupe Hidalgo, at least in spirit.

Marriage Regulations Violate Private Property Rights

In this case of marriage laws, it was the formerly Mexican portion of the state that was closer to having it right. Marriage was mostly regulated by the private sector (i.e., the church) or essentially unregulated altogether, as was the de facto situation in many parts of the American West and Southwest.

Morally speaking, of course, governments cannot legitimately restrict the ability of private parties to enter into a marriage contract, and from the state's perspective, all marriage should be is a contract.

Certainly, there are religious and moral aspects to marriage, but these are all rightly regarded as well beyond the authority and expertise of government officials. Just as governments have no legitimate authority when it comes to regulating baptisms or bar mitzvahs, the same is true of marriages. Moreover, the regulation of marriage by civil governments is a modern innovation—mostly gaining added prominence with the rise of strong postmedieval states in Europe—and hardly fundamental to the maintenance of stable human societies. A consistent respect for property rights would lead to human beings forming their own households as they saw fit. No state action is needed.

Indeed, marriage laws were of minor importance in the United States until decades after the Revolution. Writing in the New York Times, historian Stephanie Coontz has noted that marriage restrictions were novel in the nineteenth century and that it was only in the second half of the century that governments "began to nullify common-law marriages and exert more control over who was allowed to marry." Many of these nullified marriages were between individuals of varying ethnic and racial groups. Over time, other regulations were added, such as requirements that couples submit to a blood test before a marriage could be legal. All of these regulations have been illegitimate from a human rights/property rights perspective.

Freedom to Contract or Equal Protection?

But even when the Supreme Court got the sentiment right, it botched the legal ruling. As with so many other legal issues, the Supreme Court's reasoning missed the central problem with government regulation of marriage. The court ruled that the state law was not valid because it violated the Equal Protection Clause. Earlier court decisions had ruled that the concept of equal protection was not violated because enforcement applied equally to all parties of all races involved in these illegal unions. The Warren Court thus invented new lines of reasoning to justify why the older court decisions had been wrong.

A much more straightforward line of reasoning would have been this: human beings have a natural human right to freely contract, and a government cannot restrict this. This sort of ruling should not have been beyond the comprehension of the court. After all, ruling in favor of contract rights was standard operating procedure during the court's Lochner era. At that time, the court often ruled against government restrictions on private agreements precisely because those restrictions violated private contract rights.

However, the Warren Court had little interest in protecting property rights and so had to find some other rationale to rule against interracial marriage. The court apparently settled on a due process argument. Had the court gone with a reasoning that upheld free association and contract rights, of course, this would have invalidated any number of federal laws from drug prohibitions to public accommodation requirements. Obviously, the court wasn't going to allow that to happen.

And then there is the issue of "incorporation," the problem with the notion that federal courts ought to be in the business of declaring state and local laws invalid.

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Seattle's CHAZ: Homesteaders or Illegal Squatters?

06/12/2020Jeff Deist

Listen to the Audio Mises Wire version of this article.

Protestors in Seattle have taken over whole city blocks in a neighborhood known as Capitol Hill, just a bit north of downtown. They occupy city streets and parks, as well as (apparently) a police precinct building. This enclave, dubbed the "Capitol Hill Autonomous Zone" or CHAZ, is now making headlines around the world. Its newly assembled residents have declared CHAZ an independent nation apart from both Seattle and America, and thus exempt from laws and local police jurisdiction. They have set up fences and checkpoints around the area (so much for open borders), and already urban legends are proliferating about warlords taking over, extortion and shakedowns replacing taxes, and new forms of quasi-private security taking hold. Nobody knows how long the situation will persist, but recall how 2011's Occupy Wall Street demonstrations lasted many months.

Of course Capitol Hill, like all urban neighborhoods, is a mix of "public" and private property. Ingress and egress for residents and businesses take place via public streets, which are severely impaired at the moment. Property values, the viability of retail stores, and the general quietude and livability of this gentrified neighborhood are very much in flux. Anyone who owns a condo, shop, or restaurant in the area has a right to be angry and an argument for monetary compensation from both the protestors themselves and the city government that has so badly failed them.

Good luck with that in a Seattle courtroom.

But what about the purely "public" (i.e., government owned) land and buildings around Capitol Hill? To the extent that the occupied buildings and streets "belong" to the City of Seattle, are the protestors legitimately occupying them? Can anyone, Seattleite or not, make a valid claim to such property? Are they illegal squatters or legitimate homesteaders?

It seems like an absurd question on its face, and it is: surely the forceful takeover of a long-established area cannot be legitimate, even if a few government-owned roads and buildings muck up the principles involved. But no less than Professor Walter Block likens government-owned property to virgin territory, albeit stolen, available to any claimant for homesteading. In Block's conception, anything owned by the City of Seattle—libraries, buildings, equipment, roads, you name it—is as wide open to anyone as a virgin tract of land in deepest Alaska never touched by humans. 

I do not at all claim that property such as government roads or libraries is "unowned." Rather, I claim these holdings were stolen. I agree that the state now possesses them; I argue, only, that this is unjustified. And, yes, I insist, the same libertarian analysis can be applied, in this context, to virgin and stolen land. Why? This is because for the libertarian, at least as I construe him, stolen land is de jure virgin land, ready for the next homesteader to seize it (on the assumption that the rightful original owner cannot be located, or he acquiesces in the state’s seizure, or that, arguendo, we can ignore this rightful owner.)

Seattle's mayor Jenny Durkan may not go quite as far as Dr. Block, but she does appear to acknowledge the new, uh, "community" essentially colonizing major thoroughfares in the Emerald City. She may not be ready to grant the CHAZ outright ownership of the streets in question, but neither is she setting any deadlines for eviction:

seattle

Clearly the mayor is in the midst of a dangerous situation, both literally for the people in the CHAZ and in terms of her own political career. It's a public relations nightmare. And from a purely legal perspective, what grants her authority over who occupies Capitol Hill?

One answer is taxes, says Dr. Hans-Hermann Hoppe. In his view, the streets of Seattle are not virgin territory available to homesteaders, but rather akin to land held in trust by (admittedly unworthy) state agents on behalf of taxpayers. If those trustees won't sell the land or other property outright and return the funds to taxpayers, Hoppe's view is that they at least ought to operate and maintain such property on their behalf. So, for the purpose of countering Dr. Block's contention that government property should be viewed as open to homesteading—and only for that purpose, Hoppe says—"public" property should be viewed as being owned by taxpayers. As such, it should be managed on behalf of the long-suffering (net) taxpaying citizens as a matter of simple justice.

Principles aside, the essence of ownership is control. Bureaucrats, police, and politicians who control access to and use of "public" property are its de facto owners, because only they can sell, encumber, or control its use. The average American's ownership claim to the local playground or a city library is virtually nil. Simply try sleeping in them overnight, and you'll quickly find out who really owns them. So, for the moment, the Seattle protestors have the greatest control over Capitol Hill and hence an ownership claim of sorts under the brute force of "possession is nine-tenths of the law."

Whether their claim is valid comes down to whether they are illegal squatters or righteous Lockean homesteaders. In a densely settled area like Seattle, with a long history of property titles flowing from valid sales, the question becomes absurd. Their protests and encampments directly affect the undisputed private property all around them. The Seattle government has thoroughly controlled the roads and police using funds forcibly taxed from Seattle residents. Capitol Hill residents, businesses, and visitors rely and depend on existing understandings and contractual arrangements. Seattle cannot be homesteaded, not even city property, in any conceivable manner that does justice to its current inhabitants. And to the extent that they've paid for it all through taxes, their right to evict the CHAZ protestors clearly supercedes any "right" to conflate occupation with protest.   

It's tempting to dismiss the Seattle protestors en masse because of their terrible and violent political beliefs, and their terrible designs for remaking America without property or markets. But that doesn't change the thorny question of how to deal with them here and now. If they are illegal squatters—not to mention disruptors of many who live or work in the area—then their forcible removal is justified. But New York City lacked the political will to remove Occupy Wall Street campers from Zuccotti Park for many months. Will ultrawoke Seattle in 2020, with its obliging mayor, evict the CHAZ protestors anytime soon?

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